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Product differentiation and consumption efficiency in mortgage markets

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  • Ward, Damian Robert
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    Abstract

    This study evaluates the outcome of non-price competition in the UK mortgage market. Developing a novel application of data envelopment analysis, DEA, within the banking literature, this study finds evidence of high consumption efficiency. Employing cluster analysis, the study provides additional evidence that efficient mortgages are available for borrowers across a broad range of market segments. The study also shows that these beneficial aspects of non-price competition are only available to borrowers who select mortgages based on rational measures of price. The discussion closes with guidance for policymakers.

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    File URL: http://www.sciencedirect.com/science/article/B6V7S-4SC5PNJ-1/2/423ca5a6b008b3c21c62af016e3e1787
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Research.

    Volume (Year): 62 (2009)
    Issue (Month): 8 (August)
    Pages: 805-809

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    Handle: RePEc:eee:jbrese:v:62:y:2009:i:8:p:805-809

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    Web page: http://www.elsevier.com/locate/jbusres

    Related research

    Keywords: Consumption efficiency DEA Product differentiation Mortgage Banking;

    References

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    1. Juan Fernández de Guevara & Joaquín Maudos & Francisco Pérez, 2005. "Market Power in European Banking Sectors," Journal of Financial Services Research, Springer, vol. 27(2), pages 109-137, April.
    2. John Y. Campbell & Joao F. Cocco, 2003. "Household Risk Management and Optimal Mortgage Choice," NBER Working Papers 9759, National Bureau of Economic Research, Inc.
    3. David Miles, 2005. "Incentives Information and Efficiency in the UK Mortgage Market," Economic Journal, Royal Economic Society, vol. 115(502), pages C82-C98, 03.
    4. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
    5. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September.
    6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
    7. Angel S. Fernandez-Castro & Peter C. Smith, 2002. "Lancaster's characteristics approach revisited: product selection using non-parametric methods," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 83-91.
    8. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series 0072, European Central Bank.
    9. Patrick L. Brockett & William W. Cooper & Linda L. Golden & John J. Rousseau & Yuying Wang, 2005. "Financial Intermediary Versus Production Approach to Efficiency of Marketing Distribution Systems and Organizational Structure of Insurance Companies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 393-412.
    10. Maria Silva Portela & Pedro Borges & Emmanuel Thanassoulis, 2003. "Finding Closest Targets in Non-Oriented DEA Models: The Case of Convex and Non-Convex Technologies," Journal of Productivity Analysis, Springer, vol. 19(2), pages 251-269, April.
    11. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    12. Lee, Jeongdong & Repkine, Alexandre & Hwang, Seogwon & Kim, Taiyoo, 2004. "Estimating Consumers’ Willingness to Pay for the Individual Quality Attributes with DEA," MPRA Paper 7848, University Library of Munich, Germany.
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    Cited by:
    1. Avkiran, Necmi K. & Goto, Mika, 2011. "A tool for scrutinizing bank bailouts based on multi-period peer benchmarking," Pacific-Basin Finance Journal, Elsevier, vol. 19(5), pages 447-469, November.

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